A novel approach for evaluating market power in reactive power markets

Abstract

One of the main concerns for any power markets is whether individual participants can increase their profit by withholding capacity or bidding away from the marginal cost of providing the products. To address this concern, some tools and techniques for identifying and detecting dominant and must-run suppliers are required. Market power problems are more intricate in reactive power markets than those in other markets due to the specific properties of this ancillary service. This paper introduces a new structural index which takes into account reactive demand level, transmission network constraints, output limits, and circumstances of other suppliers. The proposed measure (reactive must procurement (RMP)) is a must-run index-based method which calculates the minimum reactive power capacity which must be procured by a reactive source (whether in generation or absorption mode) to supply reactive requirements of system. To illustrate the simplicity, practicality, and usefulness of introduced measure, the proposed index is applied to the IEEE 57bus test system. method, centralized or decentralized ancillary services control, and the type of providers (e.g., loads are likely to prefer bilateral contracts) [2]. Each method of ancillary services provision has some advantages and disadvantages. For instance, procurement of ancillary services by establishment of spot markets or tendering process facilitates new participants' entrance to ancillary services market, increases social welfare, and makes market more transparent. On the other hand, spot markets or tendering processes give more rooms for dominant players to abuse market situation and exert market power. Moreover, the risk of providing adequate resources for satisfying total demand increases by spot markets or tendering process.Local market power associated with ancillary services may be stronger than that with energy due to unique geographic locations of some units. For example, serious market power abuses have been observed at the initial operation stages of the California ancillary services market. These markets have exhibited extreme price volatility, even during periods when demand was unchanged for long periods of time [3].Voltage control and reactive power management are two aspects of a single activity that both supports reliability and facilitates commercial transactions across transmission networks. The Federal Energy Regulatory Commission (FERC) recognized the importance of voltage control by including it as an ancillary service. The FERC concluded in its Order No. 888 that reactive power supply and voltage control from generators is one of the six ancillary services that transmission providers must include in an open access transmission tariff. It also stated that reactive power from capacitors and Flexible AC Transmission System (FACTS) controllers, installed as a part of the transmission system, is not a separate ancillary service [4].The competitive outlooks for many ancillary services, such as different types of reserve, are so similar to that of ene...

Reactive Power Markets: A Review

“…A further consequence of the locality is that for some reactive power demand in the system only few providers can be considered, which may result in market power for these providers. That is often reinforced by current regulation which only considers generators as providers, while for example controllable loads are mostly neglected [7]. Also, in contrast to active power, reactive power is extremely cheap to produce, because no fuel is required [7].…”

“…That is often reinforced by current regulation which only considers generators as providers, while for example controllable loads are mostly neglected [7]. Also, in contrast to active power, reactive power is extremely cheap to produce, because no fuel is required [7]. That can result in market prices close to zero [1].…”

“…That can result in market prices close to zero [1]. Nevertheless, in most cases, reactive power setpoints cannot be set freely, because reactive capabilities are closely linked to active power feed-in of the units [7]. That interplay can be described by (P -Q)-curves and makes the analysis of reactive power markets especially difficult, because active power curtailment may be required to provide reactive power.…”

“…Chicco [77] even states that the exercise of market power cannot be completely avoided. Possible negative consequences of market power are withholding of generation by participants, wealth transfer from consumers to producers, decrease of market efficiency, and welfare loss [7]. In the following, we discuss market power in reactive power markets.…”

Reactive power procurement model in electricity markets based on normalized effective reactive power reserve

“…Due to the nature of reactive power, reactive power and voltage control services are required to be provided locally. This local nature of reactive power provides more opportunity for some reactive power providers to exercise market power . Hence, in order to restrict the effects of reactive market power, a power system must be divided into VCAs and for each VCA, a uniform price is determined.…”